DETERMINANTS OF FINANCIAL SUSTAINABILITY OF PENSION FUND ADMINISTRATOR IN NIGERIA

1.1              Background to the Study

Before April 1974, gratuity and pension for public servants were not treated as rights

but as privileges in Nigeria.. However, from 1974, with the amendment of section 6 (1) of the pension law, they became rights which an entitled public servant could claim from the government. This general Pension scheme for civil servants was financed from government general revenue on a ‗pay –as-you-go‘ basis and not from a special fund established for the purpose. Under the pensions Act of 1979, both gratuity and pension were salary rate related and were financed wholly by the government without any contribution by the workers. In contrast, government parastatals tended to operate separate funded schemes which required setting aside on an annual basis, a percentage of the total basic salaries of their staff in a special fund under the management of a board of trustees.

The National Provident Fund (NPF) Act provided for private sector pension schemes. Originally,NPF, a contributory scheme, which was established in 1961, also covered public servants. It was wound up for public servants after it has lost N17bn in corruption. Unlike the public sector, most in-house pension schemes in the Nigerian private sector were funded by both the employers and employees (Ije, 2001). The employees contributed a percentage of their monthly salaries, subject to a maximum and the employers also contributed certain percentage of employees‘ salary to the scheme. Considering the benefits resulting from the statutory scheme, individual companies tended to operate their own company and administered contributing gratuity schemes to supplement the statutory retirement gratuity scheme.